ArcelorMittal Closes Steel Plant Buyout

Zacks

Steel giant ArcelorMittal (MT) has closed the acquisition of ThyssenKrupp Steel USA (TK Steel USA). ArcelorMittal, in Nov 2013, signed a 50-50 joint venture pact with Japan’s Nippon Steel & Sumitomo Metal Corporation (NSSMY) to acquire ThyssenKrupp’s 100% interest in TK Steel USA for $1.55 billion.

Calvert, Alabama-based TK Steel USA is a steel processing plant that holds a total capacity of 5.3 million tons including hot rolling, cold rolling, coating and finishing lines. The plant represents the most modern finishing facility in the world.

This acquisition is an important strategic fit for ArcelorMittal and is expected to deliver $60 million of annual synergies for the company.

ArcelorMittal holds an identified franchise business in the automotive market and the acquisition of TK Steel USA is expected to reinforce ArcelorMittal’s existing auto business in the U.S. The NAFTA (North American Free Trade Agreement) automotive market is expected to see an approximate 15% rise in vehicle production over the next decade.

This transaction will also uplift ArcelorMittal’s position in supplying to the NAFTA energy industry, which is expected to demonstrate growing demand for energy pipe and tube products due to increases in oil and natural gas exploration and production.

The newly formed joint venture is also expected to meet the growing needs, especially of Japanese car manufacturers, for ultra-high tensile strength products with good formability.

ArcelorMittal currently carries a Zacks Rank #3 (Hold).

Other companies in the steel industry with a favorable Zacks Rank are AK Steel Holding Corporation (AKS) and United States Steel Corp. (X). Both these companies retain a Zacks Rank #2 (Buy).
 

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